JORDAN'S TRADE MINISTER REVIEWS FTA TRADE ISSUES

C O N F I D E N T I A L SECTION 01 OF 03 AMMAN 004133

SIPDIS

USDOC 4520/ITA/MAC/OME/CLOUSTAUNAU
STATE FOR EB/CBA
PASS TO USTR--E. SAUMS

E.O. 12958: DECL: 04/20/2014
TAGS: ETRD KTIA KIPR PREL JO
SUBJECT: JORDAN'S TRADE MINISTER REVIEWS FTA TRADE ISSUES
FOR JUNE 8 JOINT COMMITTEE MEETING

REF: A. AMMAN 02494

B. AMMAN 03425

Classified By: DCM--D.Hale, Reasons 1.5 (b) and (d).

(CONFIDENTIAL -- ENTIRE TEXT.)


1. (C) SUMMARY: DPM and Trade Minister Mohammad Halaiqa
reviewed with the Ambassador a number of trade issues, most
related to the upcoming June 8 meeting of the FTA Joint
Committee. Halaiqa reported that he had spoken with Israeli
DPM and Trade Minister Ehud Olmert regarding accelerated
tariff reductions and Olmert had replied that he would tell
USTR that Israel had no objections. On rules of origin,
Jordan intends to upgrade its trade relationship with Israel
and then approach the EU with a list of zero tariff products,
preferably with support from the USG. On the DAMAN
preinspection issue, Halaiqa offered little. He argued that
the standards being applied were a combination of U.S. and
European standards but agreed on the need to discuss the
issue at the JC. Turning to the Government Procurement
Agreement, Halaiqa was very appreciative of the support of
the U.S. delegation in Geneva and hopes that an agreement
could be signed by the end of the year, again with U.S.
assistance. Halaiqa touched on the pharmaceutical and double
taxation agreement issues. (This cable will be supplemented
with septel presenting post's thinking on the agenda for the
JC and proposed strategies.) END SUMMARY.

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ACCELERATED TARIFF REDUCTIONS
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2. (C) On May 20, the Ambassador called on Deputy Prime
Minister and Minister of Industry and Trade Mohammad Halaiqa
to discuss a number of trade issues in the run-up to the June
8 FTA Joint Committee meeting in Washington, DC. After
congratulating Halaiqa on the success of the just-completed
World Economic Forum (WEF),held at the Dead Sea, the
Ambassador said that he understood Jordan had discussed with
Israel the issue of accelerated tariff reductions. Halaiqa
replied that indeed he had raised the issue with Israeli
Deputy Prime Minister and Minister of Industry and Trade Ehud
Olmert during the WEF, in the presence of King Abdullah.
Olmert responded that accelerated FTA tariff reductions posed
no problem for Israel. Olmert mentioned that he would be
traveling shortly to Washington and that he would mention
Israel's agreement to the proposal to USTR Robert Zoellick.


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JORDANIAN-ISRAELI TRADE AGREEMENT
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3. (C) The Ambassador asked about the recently-announced
trade agreement between Israel and Jordan which was signed at
the WEF with considerable press coverage. Halaiqa explained
that the agreement was a preliminary step needed to enable
Jordan and Israel to gain the same QIZ-type treatment with
the EU that already exists with the U.S. As part of this
process, Jordan will upgrade its relationship with Israel to
a "semi-FTA" and negotiate with the EU a zero-tariff list of
products. Both Jordan and Israel would need to gain EU
support. Halaiqa termed the approach "a major step" which
would attract good investment to Jordan. The terms of this
proposal would undoubtedly differ from those of the QIZs and
result in different percentages of Israeli and Jordanian
content. In any event, Halaiqa requested U.S. support with
the EU for the proposal.

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RULES OF ORIGIN
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4. (C) The Ambassador asked what Jordan would be raising at
the JC with respect to rules of origin. Halaiqa said that
Jordan was looking at the possibility of "accumulation of
content" under the FTA rules of origin. An accumulation with
Singapore could allow Jordan to increase exports to the U.S.
as envisioned under the current agreement, although the
proposal needs further work at the technical level. Jordan
would hope eventually to be able to accumulate rules of
origin with other FTA partners of the U.S., including,
eventually, Iraq and the Palestinian Authority.

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DAMAN
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5. (C) The Ambassador thanked Halaiqa for his letter on the
DAMAN pre-inspection program (REF B),but emphasized that it
did not allay U.S. concerns. DAMAN was still a major concern
to the U.S. side. Halaiqa referred to the problem of
defective goods shipped from the U.S. but of East Asian
points of origin. He said that he would bring to the JC a
portfolio of pictures of these defective goods. But, he was
open to trying to resolve the issue before the JC. When
asked again about the use of standards other than U.S.
standards under DAMAN, Halaiqa said the French inspection
company (Bureau Veritas) was doing pre-inspection according
to Jordanian standards. He claimed that those standards were
composed of both U.S. and European standards. The Ambassador
said he remained concerned about the costs of the program and
the delays the pre-inspections caused. The mere fact that
this program existed was deterring would-be traders. Halaiqa
replied he believed most of the problems were caused by
companies' ignorance of the program. He concluded by saying
that the two sides should discuss the issue face-to-face at
the JC. He added that Jordan Institute of Standards and
Metrology head Ahmed Hindawi would be a part of his
delegation. In addition, Hindawi would discuss the DAMAN
program at a lunch of 100 companies.


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GOVERNMENT PROCUREMENT AGREEMENT
--------------


6. (C) The Ambassador asked Halaiqa about the apparent
slowdown in progress on a Government Procurement Agreement
(GPA). His aide, Maha Ali, said that Jordan was interested
in an interim solution through a waiver of the Buy America
Act. We advised this was unlikely. Halaiqa added that the
last GPA negotiations at the WTO in Geneva had been
successful and the U.S. delegation had been very supportive,
despite EU pressure on the threshold being discussed. Ali
said that the time-frame depends on the progress of the WTO
negotiations; Halaiqa said Jordan could sign an agreement as
soon as the negotiations were complete. He asserted that if
Jordan attempted a bilateral GPA, Singapore, which had just
signed an FTA with Jordan, would object. For this reason,
Jordan preferred the multilateral approach. Jordan had
modified its original offer and this version had been well
received in Geneva. If it can, Jordan is willing to speed up
this process. He added that the draft legislation of the GPA
was ongoing and should be ready for presentation to the
Cabinet by September 2004. (Note: The USG through USAID is
supporting much of the legal and technical work being done by
the GPA. End Note.)


7. (C) After checking with an aide, Halaiqa added that
Jordan had agreed with the U.S. Mission in Geneva on the need
to negotiate multilaterally and that Jordan may submit a
revised entity offer to the WTO this summer. Jordan will try
to reduce the transmission time and submit the proposal to
the WTO in October and the agreement could be signed by the
end of the year. The U.S. and Jordan could coordinate and
the U.S. could help press the Europeans to accept Jordan's
offer, he suggested. (Comment: The timing Halaiqa suggests
may be optimistic. Several of the working-level Jordanian
officials involved expect the process may take as long as 18
months. End comment.)

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JABA ATTENDING THE JC
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8. (C) The Ambassador welcomed the announcement that the
Jordanian-American Business Association would be accompanying
the Jordanian delegation to the JC. Halaiqa added that he
might also go to New York for meetings with the textile
industry en route to King Abdullah's private sector promotion
visit to Chicago. Halaiqa would travel with members of
Jordan's new textile trade association, JGATE. (Note: The
USG, again through USAID, is partially supporting four to six
members of the JABA private sector delegation attending the
JC. End Note.)

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MERCK'S OSTEOPOROSIS DRUG PROBLEM
--------------


9. (C) Regarding Merck's problem with the osteoporosis drug,
Fosamax, Halaiqa said the issue was still in the courts. In
response to the Ambassador's assertion that the decision
should be a regulatory one, Halaiqa responded that there were
merits to that point, but on balance, it was felt this was a
matter for the courts to decide. Nevertheless, he said that
he would bring an official from Jordan's Food and Drug
Administration to the JC. (Comment: Merck's original case
was thrown out by the court because the filing was late.
Merck is still considering whether to have its regional arm
re-file, an approach allowed under Jordanian law. End
Comment.)

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DOUBLE TAXATION
--------------


10. (C) Halaiqa brought up his interest in an agreement on
avoidance of double taxation. The USAID representative
attending reported that USAID had done some preliminary work
on this, funding a study which indicated that such an
agreement might undercut Jordan's tax revenues. Halaiqa
commented that Jordan collected no taxes from Jordanians
living in the U.S. (Note: USAID is preparing a full study on
this issue that should be completed by the end of August

2004. Additionally, USAID is investigating the issue of
financial disclosure, a former stumbling block in
negotiations. End Note.)
GNEHM